If you are a primary producer, there are a number of special rules which apply to income you may receive, or expenses you incur, as a result of disasters such as bushfires and floods.
You may need to know about:
Abnormal income
If you are forced to sell your livestock as a result of the disaster, how do you treat the income in your tax return?
You can elect to spread profit from the forced disposal or death of livestock over a period of five years. Alternatively, you can elect to defer the profit and use it to reduce the cost of buying replacement stock or to maintain breeding stock for the purpose of replacing the livestock, in the disposal year or any of the next five income years. You need to include any unused part of the profit in your assessable income for the fifth income year.
How do you treat the income from having to do two wool clips due to the disaster?
Tax relief is available for income from the sale of two wool clips in one income year because of early shearing due to drought, fire or flood. You can elect to defer the profit on the sale of the wool clip from the advanced shearing to the following year.
How do you treat insurance proceeds for loss of business stock, such as trading stock, destroyed by the disaster?
Generally, if you have claimed the cost of the insurance premium as a deduction, payments you received from a claim under the policy will be treated as assessable income.
You can elect to include insurance pay-outs for loss of livestock or loss by fire of trees that were assets of a primary production business in your assessable income in equal instalments over five years. If you do not elect to do this, the whole amount is taxed in the year of receipt. Elections can be made before or on the date you lodge the first return after receiving the insurance payment.
Last Modified: Friday, 1 March 2013